The Abe government focused on the economy, energy strategy, and defense policy reform but the timeline for implementing these pillars of Abe’s agenda was uncertain.  A flurry of bilateral diplomacy paved the way for various initiatives including a trilateral summit with South Korean President Park Geun-hye and President Obama in The Hague.  Obama made a state visit to Japan highlighting areas for strategic cooperation between Japan and the United States but the two governments were not able to conclude a bilateral trade agreement that would strengthen the economic pillar of the alliance.

Abe’s domestic agenda

Prime Minister Abe Shinzo began his second year in office focused on key pillars of his policy agenda: the economy, energy, and defense policy reform.  To offset the potentially adverse effects of a consumption tax increase from 5 to 8 percent, which came into force on April 1 per legislation passed in 2012, the Abe government introduced a $53 billion supplementary budget approved by the Diet in February to sustain fiscal stimulus, or the “first arrow” of Abe’s economic policy (“Abenomics”).  Abe also pledged to cut corporate taxes in an address to the World Economic Forum in Davos, but that fueled an ongoing debate back home about the importance of stimulus vs. fiscal consolidation.  The “second arrow,” or monetary easing by the Bank of Japan, appeared to push the economy toward inflation as intended.  In March the government released a list of regions and cities designated as “national strategic special zones” that would introduce various incentives for investment to support the “third arrow” or structural reform agenda widely deemed essential for sustainable growth.  Details on the parameters for deregulation and other initiatives that would signal substantial reform in the special zones were expected in a rollout of additional growth policy initiatives scheduled for June.  Meanwhile, protracted trade negotiations with the United States linked to the Trans-Pacific Partnership (TPP) left questions about the potential for trade liberalization as an engine for reform unanswered (more below).  The Abe government also released a basic energy plan in April outlining an energy security strategy including nuclear power, but devoid of details on the future energy mix due to a glacial inspection process for restarting Japan’s idle nuclear power plants.

Defense policy also garnered attention as the government began to consider reinterpreting the constitution to exercise the right of collective self-defense.  A report by a government advisory panel listing recommendations for this policy was postponed to late spring, but Prime Minister Abe discussed his general intentions in testimony before the Diet and the ruling Liberal Democratic Party (LDP) established a special working group to examine the issue in detail.  The leadership of Komeito, a junior coalition partner of the LDP, expressed reservations and favored extensive public debate on the issue, as did many lawmakers in the opposition Democratic Party of Japan (DPJ).  Public opinion polls are mixed, with some showing a majority of the Japanese people does not favor exercising the right of collective self-defense and others showing strong support.  The domestic political climate seemed to suggest that a decision on collective self-defense – originally expected in time to inform a review of US-Japan defense guidelines scheduled to conclude at the end of 2014 – might be delayed, which would impact bilateral defense planning and potentially send a weak signal about Japan’s willingness to assume a greater leadership role on security.  Encouragingly, the Abe government approved new principles on the transfer of defense equipment (previously dubbed the three arms export principles) to strengthen security cooperation and defense industrial collaboration with other countries.  But overall the domestic debate on defense policy appeared to assume a passive nature that rendered the timeline for decision making less certain.

Bilateral engagement

After Prime Minister Abe’s visit to the Yasukuni Shrine in December 2013 brought history issues to the fore, bilateral diplomacy at the beginning of this year focused on the bilateral agenda and the strategic underpinnings of the alliance.  Commentary on history issues by public figures deemed close to Abe (parliamentarian Eto Seiichi, who reportedly criticized a US statement on the shrine visit in an online video; Momii Katsuto, appointed by Abe to the board of public broadcaster NHK, who stated that the use of comfort women was widespread during World War II; and NHK board member Hyakuta Naoki, also appointed by Abe, who reportedly alleged that the Tokyo war crimes trial was designed to cover up US atrocities during World War II) made for an awkward start to the new year, but the two governments arranged several high-level meetings indicating a commitment to move forward and emphasize avenues for bilateral cooperation.  National Security Adviser Yachi Shotaro visited Washington in January and met counterpart Susan Rice to facilitate policy coordination, Deputy Secretary of State William Burns and Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel visited Tokyo later that month to address a range of regional and global issues impacting the alliance, and Foreign Minister Kishida Fumio visited Secretary of State John Kerry in February to further the coordination process.  Defense Secretary Chuck Hagel rounded out a period of robust diplomacy with a visit to Japan in April during which he reaffirmed US commitments to defend Japan and announced plans to forward deploy two additional Aegis-equipped ballistic missile defense (BMD) ships to Japan by 2017.  This extensive engagement would set the stage for a bilateral summit aimed at reassuring Japan about the sustainability of the US rebalance to Asia and laying out a strategic framework for alliance cooperation across a range of diplomatic, economic, and security issues.

Other developments also served to reaffirm the vitality of the alliance, beginning with efforts to further trilateral coordination with the Republic of Korea.  At first it appeared that historical sensitivities would continue to complicate Japan-ROK relations when in late February the Abe government announced it would review how the decision to issue the 1993 Kono Statement on comfort women was reached, fueling speculation that it might be revised.  But Prime Minister Abe backtracked a few weeks later and stated his government had no such intention, which seemed to improve the atmosphere enough to facilitate diplomatic engagement.  On March 25, President Obama hosted President Park Geun-hye and Prime Minister Abe for a trilateral summit on the margins of the Nuclear Security Summit in The Hague focused mainly on North Korea and the importance of deterrence.  In April, the Pentagon then hosted Defense Trilateral Talks and the State Department convened trilateral consultations on North Korea, both evidence of incremental progress in a relationship critical to the US rebalancing strategy based fundamentally on alliance relationships in the region.

The Nuclear Security Summit also presented an opportunity to highlight cooperation on nonproliferation as the two governments issued a joint statement announcing Japan’s plans to remove hundreds of kilograms of highly enriched uranium and plutonium to the United States for disposition.  Developments in Ukraine also figured prominently as Washington and Tokyo coordinated on G7 statements and their respective responses to Russian support for separatism in Crimea and eastern Ukraine.  Japan, for its part, suspended talks on a bilateral investment pact with Russia, pledged $1.5 billion in aid to Ukraine, and imposed visa bans on 23 Russian individuals in announcing expanded sanctions against Russia in line with similar decisions by the United States and the European Union.

An effort to reinvigorate the economic pillar of the US-Japan alliance took center stage with bilateral trade negotiations under the rubric of the TPP.  Multiple rounds at the working level and between US Trade Representative Michael Froman and Minister for Economic and Fiscal Policy Amari Akira took place in both capitals to resolve differences on tariff reductions for sensitive agricultural products, market access issues for US automobiles, and other issues.  President Obama’s scheduled trip to Japan in late April served as an action enforcing mechanism, a unique opportunity to demonstrate joint leadership on trade liberalization that would set high standards for trans-Pacific economic integration.  The question was if both leaders would be willing to spend the political capital necessary to overcome the politics of trade in their respective capitals.

State visit to Japan

President Obama made a state visit to Japan April 23-25.  The trip was a rescheduling of the cancelled APEC/East Asia Summit itinerary from last fall, and the president used this visit to reassure Japan about the US commitment to the region and to outline areas of strategic cooperation between the two countries.  Prime Minister Abe kicked off the visit by hosting the president for a casual sushi dinner at a famous eatery in the Ginza district, seemingly to develop a rapport after several brief meetings on the sidelines of international gatherings where time is often limited, though Japanese reports suggested the meeting was primarily spent on sectoral trade issues rather than larger strategic issues or rapport-building. The two leaders participated in a joint press conference after the summit and Obama endorsed the defense reform agenda of the Abe government, including consideration of the exercise of the right of collective self-defense and the establishment of a National Security Council and legal framework for information security to facilitate intelligence and policy coordination between the two governments. Abe expressed Japan’s support of the US strategic rebalance to the Asia Pacific region, and the two leaders issued a joint statement reaffirming the importance of the alliance in that context.  Trilateral dialogue with South Korea and coordination on Ukraine were cited in the statement as examples of cooperation on regional and global challenges, respectively, and both countries expressed a shared interest in building a constructive relationship with China but also addressed some of the uncertainties associated with China’s rise.  The statement stressed US-Japan cooperation in maintaining maritime order in the East and South China Seas based on respect for international law, including the freedom of navigation and oversight; opposing any attempts to assert territorial or maritime claims through the use of intimidation, coercion, or force; and calling for confidence building measures to reduce tensions.  The statement noted that US commitments under the US-Japan Security Treaty extend to all territories under Japan’s administration, including the Senkaku Islands.  Cooperation on the realignment of US forces in Japan and an ongoing review of bilateral guidelines for defense cooperation completed a comprehensive section on the security pillar of the alliance.

More broadly, the two countries reiterated a shared interest in deepening economic, diplomatic, and security ties with the Association of Southeast Asian Nations (ASEAN) and trilateral cooperation with like-minded partners including South Korea, Australia, and India.  The joint statement also highlighted other important areas of alliance cooperation including energy – namely the importance of US LNG exports to support Japan’s energy security strategy and joint cooperation on climate change – and a renewed commitment to advancing a common agenda on global development issues such as women’s empowerment, human security, humanitarian assistance, disaster risk reduction, and global health.

Joint cooperation in multilateral fora to promote trade liberalization and economic growth also featured but was overshadowed by the failure of the two governments to conclude bilateral trade negotiations related to TPP.  Reports on what was achieved vary on both sides of the Pacific:  some suggesting substantial progress on the principle of market opening, but others revealing frustration at the lack of concrete progress.   Japan’s reluctance to eliminate tariffs in sensitive areas appeared to some US observers as a weakening commitment to high standards for trade liberalization that are a hallmark of the TPP.  From a Japanese perspective, the Obama administration’s reticence on the importance of trade, coupled with the absence of Trade Promotion Authority (TPA) from the Congress, may have raised questions about expending political capital on TPP without a sense of reciprocity from Washington.  The joint statement indicated a “path forward” to resolve remaining differences and negotiations were expected to continue, though the timeline for an agreement remained uncertain.

The leaders also issued an annex to the joint statement on the importance of people-to-people exchange between the two countries, announcing a shared goal of doubling two-way student exchange by 2020.  They also welcomed the recent uptick in congressional exchanges between the Congress and the Diet, an important channel of communication that has anchored the bilateral relationship in the past and was poised to develop with the establishment of a bipartisan US-Japan caucus in the Congress.

Next steps

The Abe government will try to shape the domestic debate on defense policy and offer more clues on economic reform when it announces new elements of the growth strategy in June.  Meanwhile, President Obama will attempt to shape the US domestic policy debate ahead of the midterm elections in the fall.  Bilaterally, trade negotiations will likely take place with the timeline for concluding TPP in the balance, and a review of bilateral defense guidelines will pick up amid uncertainty about the timing for Japan’s decision on collective self-defense. Finally, coordination on pressing challenges including North Korea, overdue for a provocation, and global challenges such as Ukraine could feature on the diplomatic agenda.